Great Western Bancorp, Inc.
Q1 2020 Earnings Call Transcript

Published: 28 Jan 2020

[Operator:]

Good morning and welcome to Great Western Bancorp's First Quarter Fiscal Year 2020 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions].Joining the call this morning are Ken Karels, Chairperson, President and Chief Executive Officer; Doug Bass, Chief Operating Officer; Peter Chapman, Chief Financial Officer; Karlyn Knieriem, Chief Risk Officer; and Seth Artz, Head of Investor Relations.Before getting started, Great Western would like to remind you that today's presentation may contain forward-looking statements that are subject to certain risks and uncertainties that could cause the company's actual future results to materially differ from those discussed. Please refer to the forward-looking statement disclosures contained in the presentation on the company's Web site, as well as their periodic SEC filings for a full discussion of the company's risk factors.Additionally, today certain non-GAAP financial measures will be discussed on this conference call. References to non-GAAP measures are only provided to assist you in understanding Great Western's results and performance trends and should not be relied upon as a financial measure of actual results. Reconciliations for such non-GAAP measures are appropriately referenced and included within the presentation. Please note this event is being recorded.I would now like to turn the conference over to Great Western Bancorp's Chairperson, President and Chief Executive Officer, Ken Karels. Ken, please go ahead.

[Kenneth Karels:]

Good morning and thank you for joining the call. With this quarter marking the beginning of our fiscal year, I’d like to point out a few highlights. Net income of 43 million has remained very solid. We were successful in our strategic management of deposit interest cost which decreased in the quarter by 20 basis points and we will continue to manage this going forward.Strong expense control resulted in an efficiency ratio at 46.2% for the quarter. None of our share buyback authorization was executed during the quarter but we will continue to look at this as we generate capital in excess of what is required to fund organic growth due to our strong returns.Now for more insight on our financial results, I’d like to turn the call to our Chief Financial Officer, Peter Chapman. Pete?

[Peter Chapman:]

Thank you, Ken, and good morning, everybody. Looking firstly to revenue, interest income was $132 million for the quarter which decreased because of a $2 million reversal of interest on exposures that were moved to nonaccrual during the quarter and also a decline in lending balances, which Doug will touch upon more in a minute for everybody.Net interest margin and our adjusted net interest margin were 3.68% and 3.65%, respectively, for the quarter with the adjusted net interest margin down 4 basis points quarter-over-quarter with a 7 basis points impact from the interest reversal on loans moved to nonaccrual.In addition, a reduction in loan yields lowered NIM by 17 basis points but this was offset by a reduction in total deposit cost of 20 basis points and slight improvement in the investment portfolio yield of 2 basis points.We will continue to proactively manage deposit cost in the mid rates again down in January, but we expect underlying NIM to contract a few basis points for the quarter in the current rate environment in line with prior guidance particularly as we’re seeing the loan yields continue to compress as competition for good credit relationships remains very strong.Noninterest income increased by $0.7 million for the quarter to $15.7 million mainly due to an increase in wealth management income through the closing of the Colorado acquisition at the start of the current quarter.Noninterest expenses were $57 million for the quarter, an increase of 1.7 million. Salaries and benefits increased by $2.8 million due to lower variable compensation in the prior year in addition to general salary expense increases and stock vestings in the current quarter.Also professional fees increased by $0.4 million due to lower FDIC expense in the prior quarter. These were offset with reductions in data processing and communication of expenses by $0.8 million due to lower customer mailings in the current quarter and higher annual maintenance expenses in the prior quarter.While we continue to be diligent with our expenses, we expect an increase in the following quarters due to annual salary merit increases effective in the March quarter, investment in new lending resources to grow the business and great and risk management investment to continue with enhanced management, monitoring and analytics of the loan portfolio. Accordingly, we expect spend to be more in the $59 million to $60 million range going forward.For more now on loan and deposit growth, I'll turn the call over to our Chief Operating Officer, Doug Bass. Over to you, Doug?

[Doug Bass:]

Thanks, Pete, and good morning, everyone. At the end of the December '19 quarter end, loans were 9.6 billion, which is a decline of 81 million from the prior quarter. During the quarter, commercial real estate loans decreased slightly as advances in construction and development and multifamily residential were offset with declines in non-owner occupied and owner occupied.During the quarter, we experienced 106.5 million in credits that refinanced with other financial institutions at pricing that did not meet our return targets. Commercial non-real estate loans were down 43.5 million. This was mostly centered in our mortgage warehouse portfolio that ended the quarter down by 26 million due to the underlying transaction and disbursement activity.Additionally, the undrawn percentage of operating lines of credit increased approximately 1% over the last two quarters. This reflects a balance decline of approximately 25 million. Agricultural balances decreased 28 million during the quarter with the decrease primarily driven by the exit of relationships with a higher risk profile which is a trend we anticipate over the upcoming quarters as operators secure suitable financing alternatives.Our de novo office strategy continues to be a key contributor to our growth and expansion. And for the quarter the aggregate growth of those portfolios were 4% annualized. We have successfully opened 11 offices over the last few years, three of which are currently in the loan production office stage. Currently, we have leadership and teams in place for two new locations with timing depended on reaching internal targets. Nine new commercial bankers have been hired in various existing markets during quarter fiscal one.Consistent with prior guidance, we will spend fiscal year 2020 rebalancing the risk profile in all sectors of our loan book, particularly those in the agricultural sector. Our priority of improving asset quality is expected to result in exits that will impede loan growth which we have seen traces of already. This will continue over the next few quarters and our expectation is still for loan growth to be in the low-single digit range for 2020.Deposits declined 212 million to 10.1 billion during the quarter, primarily related to a reduction in brokered deposits of 214.8 million as those costs have become less competitive. Within the rest of the portfolio, non-interest bearing deposits showed good growth particularly in the consumer book offset with a 127 million decrease in non-brokered time deposits.Management of deposit costs have resulted in a 20 basis point decrease during the quarter due to the increased mix of non-interest bearing, coupled with a decrease of 25 basis points in interest bearing costs from reduced rates on money market and offering rates on time deposits. We have moved deposit rates down again in January and we’ll continue to move our rates down commensurate with declining loan rates to maintain a targeted net interest margin.I'll now turn the call over to our Chief Risk Officer, Karlyn Knieriem, who also oversees our loan review function to provide updates on our asset quality strategy. Karlyn?

[Karlyn Knieriem:]

Thanks, Doug. For the quarter, net charge-offs of $6.1 million were 25 basis points on an annualized basis which is a decline from 31 basis points in the prior quarter. Of this amount, $4.5 million was attributable to a few agro relationships with the remaining 1.6 million spread across a number of smaller non-agro relationships.Total credit-related charges at $12.6 million were 8.4 million higher than the prior quarter driven mainly by 6.1 million of more normalized provision expenses and 2 million from reversed interest income on loans moved to nonaccrual in the period.Nonaccrual loans as a percent of total loans were 1.62%, up from 1.1% the prior quarter and a modest increase from historic levels primarily related to a small number of agricultural loans identified as we continue to work through the higher risk credits.Our allowance for loan loss to loans increased 3 basis points in the quarter to 76 basis points and our comprehensive credit coverage, which includes credit-related fair value adjustments on our long-term portfolio and purchased accounting marks was 94 basis points.Looking at our loan classifications, our loans graded substandard increased $168 million to 640 million due to a $67 million net increase related to a small number of ag loans primarily in dairy and one in the swine sector and $101 million increase in non-ag loans particularly with a few relationships in health services.Watch loans increased slightly to $416 million related to additional monitoring of a small number of relationships. As an update to the asset quality of the dairy portfolio, at the end of the quarter we had $230 million rated as substandard and 63 million rated as watch. Fundamentals for this sector continued to improve and in general, quarter two and quarter three financials validated the anticipated improvement in profitability supported by a lift in milk prices.We are regularly gathering financial information as it becomes available so we can update our views on not only the operational performance but also the overall financial health of each relationship.In recent quarters, we have discussed our broader focus on overall asset quality and we are making good progress on those initiatives. One key change we will make relates to a loan classification in ratings as we have an in-flight project that will give a more granular view of our loan ratings and asset quality in general and upcoming quarters.Among other things will be the implementation of a special mention rating category as part of a criticized loan framework that does not exist in our current rating scale that typically is used by other institutions and falls between watch and substandard.By implementing our new scale, we will better align with the criticized and classified ratings and metrics seen in the industry while also allowing us to be more efficient in managing our credits and relationships and complementing our adoption of CECL later in the year.While this project is not yet complete, all things being equal, we would expect this to move a number of relationships from substandard to special mention when implemented and bring down the level of substandard loans based on the current portfolio.With that, let's turn the call back to Ken for some closing remarks.

[Kenneth Karels:]

Okay. Thank you, Karlyn. I am pleased with how we've begun the year as our consistency in expense and margin management resulted in good earnings, reflected in our strong return on tangible common equity of 15% and return on assets of over 1.3%. Now is the right time to reposition our loan portfolio and make enhancement that will both improve our current asset quality and enable us to achieve future growth.We will now open up the call for questions.

[Operator:]

We will now begin the question-and-answer session. [Operator Instructions]. The first question today comes from Jeff Rulis with D.A. Davidson. Please go ahead.

[Jeff Rulis:]

Good morning.

[Kenneth Karels:]

Good morning, Jeff.

[Jeff Rulis:]

Yes, really just a credit-related question. The commentary on the dairy side, so if that was sort of the impetus for the increase in substandard loans, did you true that up with the commentary on how you’re feeling more positive on dairy, kind of what’s flushing through there and maybe if you can touch on kind of workout timelines of what was added? And then kind of into the renewal points of do we expect to see when the diary book is then annual reviewed kind of the exit point of that, that would be helpful? Thanks.

[Doug Bass:]

Okay, Jeff. This is Doug. Let me take that question for you. First off on the substandard increase, it was due to a one-time event. It should be corrected on that relationship in the month of February. It was not an earnings or cash flow-related downgrade. That item should be corrected here. Relative to comments I think that were made last quarter, we talked about roughly a 155 cash flow with Class III milk prices in the low 16s. What we are seeing today would be debt service coverage from that up to 2.0x for debt coverage and that’s reflected in Class III milk prices that are averaging in the low 17s today. Probably also to note is many of the producers are using the opportunity to lock in revenue insurance through the USDA program which allows them to lock in current prices out for 18 months. Many of our producers are using that program. Relative to renewal timelines and risk rating timelines, we have looked at these credits on a rolling four-quarter basis. Many of the operations started turning the quarter in Q2. Virtually all had very profitable results in Q3 as we’re gathering information. Q4 results for fiscal year-end 12/13/19 will usually start coming in toward the end of March, April and early May. So the renewal season for this book of business would typically be in the April-May timeframe. We anticipate based on trends over the last two quarters and recent milk prices and locked in prices through the revenue protection program and favorable production levels that a number of these relationships will be considered for a risk rating improvements at the renewal period that will probably be in the April through May timeframe.

[Jeff Rulis:]

Okay. What was the size of the one-time add that you expect to be corrected in February?

[Doug Bass:]

The substandard credit result from 9/30 to September went up 35 million, so it was embedded within that number.

[Jeff Rulis:]

Okay. And I’m sorry, the last one was just on charge-off visibility. This was sort of the lowest quarter I guess on net. In the last few quarters, fiscal '19 was obviously a bigger charge-off quarter. Any visibility on fiscal '20 charge-off activity, something less than '19 and something more than '18? Any broad thoughts on where we are in the cycle on charge-offs?

[Peter Chapman:]

Yes, just Jeff forward I suppose if you look over the average of loss for that June 1, we’d hope is nominally in there. So I think somewhere in that 25 to 35 point range I think is a safe boundary to think about it in.

[Jeff Rulis:]

Thank you.

[Kenneth Karels:]

Okay. Thanks, Jeff.

[Operator:]

Your next question comes from Andrew Liesch with Piper Sandler. Please go ahead.

[Andrew Liesch:]

Hi, guys. Good morning.

[Kenneth Karels:]

Good morning, Andrew.

[Andrew Liesch:]

Just want to touch on the securities book in the quarter and the increase in borrowings, just kind of curious. What was really driving some of the movement there? Was that additional borrowing just to offset some of the deposit outflows in the brokered accounts? Then what was causing the build in the securities book and how should we look at that as a size going forward?

[Peter Chapman:]

Yes, sure. It was sort of a mix change, Andrew, between the brokered CDs and FHLB. We just look at both of those interchangeably and whatever is – if we can save a few points going one way or the other we’ll certainly continue to look to do it. There’s a little bit more build in the current quarter. We had some good deposit inflow. I’d see it sort of flattish to a modest sort of low-single digit increase for the rest of the year, Andrew.

[Andrew Liesch:]

Okay, great. Thank you. I’ll step back.

[Kenneth Karels:]

Okay. Thank you.

[Operator:]

The next question comes from Ebrahim Poonawala with Bank of America Merrill Lynch. Please go ahead.

[Ebrahim Poonawala:]

Good morning, guys.

[Kenneth Karels:]

Good morning.

[Ebrahim Poonawala:]

I guess just the first question taking a step back on credit, it sounds like you don’t expect just a [indiscernible] charge-off guidance you gave for the year, doesn’t sound like you expect big losses despite the migration that we’ve seen. So the P&L impact when we think about provisioning should be relatively modest as you move some of these credits. So is that a safe assumption?

[Peter Chapman:]

Look, I think sort of run rate on where we are in the current quarter, Ebrahim, this might be a couple million dollars above what we have previously guided once you sort of throw the interest accrual in there as well. But we’d hope sort a quarter like this looks to be a more normalized quarter from an overall expense perspective. There could be a little bit of lumpiness quarter-on-quarter as we do go through some of these large ones with charge-offs and the like. But sort of over three or four quarters out we hope it settles down to around these levels.

[Ebrahim Poonawala:]

And I guess the bigger picture is just because of all the moving pieces on ag portfolio and you talked about higher risk portfolio a few times, like can you quantify what you view as higher risk of your total loan book? And you’ve talked about some runoffs which is included in your low-single digit loan growth guidance, but I’m just trying to get a sense of what do we expect on substandard loans and watch list loans as we move forward in 2020? Do we continue to see inflows or do we start seeing an improvement, but that’s kind of the biggest driver of how from an investment standpoint folks are looking at your stock and I’m just trying to get a sense of should we prepare to see worsening in those metrics or an improvement?

[Doug Bass:]

Yes, Ebrahim, this is Doug. Let me talk versus maybe end of the next quarter or the following, let me talk over several quarter horizon when we look at the trajectory. As I mentioned earlier of the dairy book, we see a number of upgrades that are happening there over the next two fiscal quarters and then when we take a look at a couple of the other large downgrades that happened in the hog industry that we called out in the PowerPoint that you’ve seen, those two operations have also seen more favorable results as tariff impacts early in calendar '19, so we see some rebounding there. Grain prices for much of the Midwest are at breakeven levels when we look at corn and soybeans, cattle and hogs. And again more of the operations are probably going to show positive results. So it’s really difficult to project a quarter-to-quarter number, but over the horizon of the next few quarters we plan to see improvements in those metrics.

[Ebrahim Poonawala:]

Got it. And anything outside of the ag book where you’re concerned? You mentioned some of these C&I loans where you’ve seen one-off migration issues. Anything that’s concerning from a geography standpoint or an asset class? You mentioned healthcare earlier, so just wondering if there’s something there that could become an issue.

[Karlyn Knieriem:]

Good morning. This is Karlyn. We are conducting monthly segment reviews as part of our risk management practices and we just recently did conduct a healthcare deep dive actually and did not downgrade any pass rated credits from that review. And as far as some other emerging areas, we think that that this point we’ve been through the majority of our higher risk portfolios and are now migrating down to smaller credits for the review. Geography, nothing is really sticking out that way.

[Ebrahim Poonawala:]

Got it. And just on a separate topic if I can sneak one more in, in terms of capital return. You mentioned in your strategic priority for the year looking at acquisitions, Ken, if you can just talk to us in terms of buybacks versus M&A, how you’re thinking about both those and if there’s any update on the CEO search?

[Kenneth Karels:]

Yes. I think you got three questions in there, Ebrahim. That’s really good. So the first, definitely we will continue to look at acquisitions. And without going into much detail, always have something active on it too. There’s some opportunities maybe first in deposit-only acquisitions that may happen. And we still have strong returns, generate a lot of capital. We as other banks are seeing lower loan growth. And so we will be looking at doing stock buybacks here at the opportunist times that will continue. Both of those I think can be done with the capital that we generate on it too. On the CEO search, the Board is very involved and quite far along with the CEO search. Without going into too much detail, obviously the Board will have to make some final decisions. But we had hoped to have an announcement here in the next few months regarding the CEO succession on it too. So that is moving very fast and appropriate.

[Ebrahim Poonawala:]

Got it. Thanks for taking my questions.

[Kenneth Karels:]

Thanks.

[Operator:]

The next question comes from Jon Arfstrom with RBC Capital Markets. Please go ahead.

[Jon Arfstrom:]

Thanks. Good morning.

[Kenneth Karels:]

Good morning.

[Jon Arfstrom:]

A couple of follow ups. Just bigger picture on ag again, just based on your comments, Doug, I don’t want to put words in your mouth but I think you’re saying that your ag portfolio is stabilizing to potentially improving. Is that fair?

[Doug Bass:]

Yes, I think that’s a fair comment, Jon. From one quarter to the next we’re gathering a lot of 12/31 information here over the next few months, so the reflection and improvements will probably be over the next couple of quarters in that result. But yes, I think commodity prices in dairy have improved and we’ve seen that in the last half of '19 results. We charge by monthly milk checks and we can see that result in the fourth quarter continuing to move up.

[Jon Arfstrom:]

Okay. And then as long as you have the mic, some of the loan growth activity you rattled through a few items and I think you said that 106 million in payoffs, another 26 million in warehouse, 28 million in ag. You talk about the offset to that. Where are you seeing the growth potential that offsets some of those headwinds?

[Doug Bass:]

Yes, I think first off on the warehouse lending piece, the 26 million, that was really a seasonal piece. All those relationships are still here and balances are already starting to come back, although there’s obviously seasonality to it in the spring as it picks up. That is also a segment that we’re seeing increased opportunity and demand in and we feel very comfortable with the risk profile of our warehouse lending book. That’s a segment we’ll continue to see increases in. We also will continue to see some headwinds, as I mentioned, on the ag side as we look to find alternative financing options for some of the higher risk, higher profile risk credits. On the opportunity side, we talked about the new markets. We have a 4% annualized growth going. We’ve got two new ones we’re looking at. We also have a couple others that are in the infancy stages that are probably latter in 2020 and '21 that are being discussed. So a number of initiatives internally to take a look at to try to augment and offset the headwinds of some ag portfolio declines, which have been over the last few quarters.

[Jon Arfstrom:]

Okay. All right. Thanks for the help.

[Kenneth Karels:]

Thanks, Jon.

[Operator:]

The next question comes from David Long with Raymond James. Please go ahead.

[David Long:]

Good morning, everyone.

[Kenneth Karels:]

Good morning.

[David Long:]

The substandard loans that were into the non-ag, I think you said it was the healthcare services-related. Any additional color you can provide on those? Were there anything in common amongst the credits that we should be aware of?

[Kenneth Karels:]

I think, as Karlyn mentioned, David, nothing geography that would be consistent. What we are seeing are senior housing projects that are in a slower absorption, slower lease-up than originally planned. And when those don’t meet original assumptions, we moved them down in a risk rating mode. The fortunate pieces, all of those have been supported by a guarantor and ownership and continue to see improved performance. But it’s really just in that healthcare piece. And then as Karlyn mentioned, we went through the segment report in January, given the elevated downgrades in that sector and resulted in feeling good about the entire rest of the book with no further downgrades.

[David Long:]

Got it. Good. Thank you. And then as it relates to your deposit cost, a very good quarter there. If everything kind of moves as you planned, what kind of improvement in deposit costs can we look at for the next couple of quarters?

[Peter Chapman:]

Probably a little bit more modest than what you’ve seen this quarter. But as we said, we’ve moved money market and CD rates down in January to sort of move towards that in line guidance with NIM. So the unknown is on the loan side of things, but we’d hope to manage NIM within sort of that few basis point downward movement over the next couple of quarters.

[David Long:]

Okay, great. Thanks, guys.

[Kenneth Karels:]

Thanks.

[Operator:]

The next question comes from Damon DelMonte with KBW. Please go ahead.

[Damon DelMonte:]

Hi. Good morning, guys. First question, just wondering, Peter, can you give a little color on your outlook for fee income as we go into 2020?

[Peter Chapman:]

Yes, certainly. I’d expect to see a modest increase, sort of I think we usually, typically talk about low-single digit range in there, Damon. Having the Colorado Trust acquisition come onboard this quarter, that was nice to see income in line with what we thought that would do. So outside of that, I’d expect a modest increase. This next quarter is usually a little soft on that service charge line just seasonally. We find that service fee income is a little lower and also you get a lower day count this quarter as well that makes it a little lower.

[Damon DelMonte:]

Got it, okay. And then with respect to land values for ag-based loans, what have been the trends on real estate values?

[Kenneth Karels:]

The Federal Reserve of Kansas City put out a report here recently that talked about a very modest 1% increase in the state of Iowa, and we had sort of similar plus or minus 2% or 3% across. So I think while certainly the ag economy continues to have its challenges, we’ve seen land values hold up relatively well. And there continue to be buyers, investors that are interested.

[Damon DelMonte:]

Okay.

[Kenneth Karels:]

Most sales come at private treaty as well, which I think is also an indication of the positive support.

[Damon DelMonte:]

Got it, okay. All right, that’s all that I had. Thank you.

[Kenneth Karels:]

Thank you.

[Operator:]

Next question comes from Janet Lee with JPMorgan. Please go ahead.

[Janet Lee:]

Good morning.

[Kenneth Karels:]

Good morning.

[Janet Lee:]

I want to go back to the healthcare services credit you planned out as part of the increase in substandard loans this quarter. Just want to clarify, is this the same healthcare facility credit you called out last quarter in the watch loan category that has migrated into substandard loans? And can you quantify the size of this problem health credit you have on your book?

[Doug Bass:]

Janet, yes, it is. It’s the one we mentioned that went into watch last quarter and we put that into substandard. And that’s correct. And it’s well within ranges of a lot of the portfolio and we don’t probably get into quoting individual portfolio size of specific credits.

[Janet Lee:]

Okay, that’s helpful. And on your comment last quarter, I think it was roughly around 318 million of total problem dairy credits, including substandard and watch loans. I think you mentioned about 30% of these were expected to be upgraded and about 20% of these going through self-liquidation. Can you just give us the update on the status?

[Doug Bass:]

Sure. I think if you look from September to December, the aggregate of watch and substandard went down about 25 million in the dairy book. And I think your percentages are continually be very close. We’ve made some estimates that are going to be right within those same ranges of combination of pay downs or upgrades that are roughly in the 40% to 50% of the current outstanding book. So we continue to see that improvement and that’s consistent.

[Janet Lee:]

Great. And lastly, just on loan growth, your low-single digit guidance. Can you just talk about like what are going to be the key drivers of the loan growth that are going to offset the decline in ag-related portfolio?

[Doug Bass:]

Sure. Well, I think we talked about the new offices. There’s some other initiatives that we have implemented here over the last few months in a couple of other sectors in our metro markets relative to some owner-occupied commercial real estate promotions that sort of tie into treasury management and operating lines of credit. We’ve also been working on some multifamily options and also some pieces that are in some of our larger markets in some specialty areas that we’re considering as well. So primarily centered in commercial and C&I lending areas in our metro markets, Janet.

[Janet Lee:]

Great. Thanks for taking my questions.

[Kenneth Karels:]

Thank you.

[Operator:]

The next question comes from Terry McEvoy with Stephens. Please go ahead.

[Terry McEvoy:]

Thanks. Good morning. Just a couple of questions on expenses. Last quarter, was there any impact in the expense line from the Trust assets in Colorado? And then in the press release, you mentioned the recruiting expenses. Was that connected to the CEO search or was that related to the build-out of the commercial lending teams that you’ve discussed in the past?

[Peter Chapman:]

Yes. More the going backwards, the recruiting expenses more on the CEO search. So definitely that was a factor there. And then on the expense side of things, there was the Trust in there for the full quarter this quarter in May, Terry. And I think when we spoke about it last quarter, I think it was $300,000 to $400,000 in expenses, I said a quarter were embedded in there as a result of that acquisition.

[Terry McEvoy:]

Okay. And then just one last question just on credit. You took the $26 million provision three quarters ago and I’m just looking at substandard loans up, call it, 35%. And what I’m hearing today is that reserve-to-loan ratio, which is relatively flat from when you took that larger provision, you still feel comfortable with that provision looking out over the next four quarters based on improving trends in dairy, breakeven in grain and some of the other kind of positives you’ve run through as it relates to the healthier loan portfolio?

[Karlyn Knieriem:]

Yes, this is Karlyn. I would say that’s correct. As I mentioned, we’ve conducted some pretty deep dives into many of these segments, and we feel comfortable with our provisioning at this point in time at the portfolio.

[Terry McEvoy:]

That’s it. Thank you.

[Kenneth Karels:]

Thank you.

[Operator:]

This concludes our question-and-answer session. It also concludes our conference. Thank you for attending today’s presentation. You may now disconnect.